As the end of 2024 nears, DerivSource shares some of the top reads from the previous year to give our readers a snapshot of some articles and podcasts that offer timely insight into ongoing derivatives industry trends, including financial regulation, developments in collateral management and margin, digital asset developments and ISDA news. Stay tuned for our 2025 Year in Preview editorial due out in the coming weeks.
Regulation
Post Trade Risk Reduction Services Feel The Heat
For a long time, post-trade risk reduction services (PTRRS) escaped the regulatory spotlight despite their increasing popularity and the important role they play in reducing systemic risks. In this article, Lynn Strongin Dodds explored how the publication of a consultation paper by the International Organisation of Securities Commissions (IOSCO) that included potential policy considerations and guidance could refocus attention on PTRRS.
The Curtain is Raised on the Repo Market
In May 2024, the Office of Financial Research (OFR) adopted its final rule for data collection of non-centrally cleared bilateral transactions in the US repo market. Lynn Strongin Dodds looked at the OFR’s final rule and the data, as well as reporting requirements that firms will have to meet.
Basel 3 Endgame: Regional US Banks Must Prepare for Compliance
The US Federal Reserve published its proposed Basel 3 endgame standards in July 2023, covering how to compute capital charges on market, credit, operational risk, and liquidity risk. It also announced that the proposal was going to be open for comments for several months—this period had eventually been extended until mid-January 2024. The new rules, also known as the Notice of Proposed Rulemaking (NPR) for Amendments to the Regulatory Capital Rule, reduce the threshold from $700 billion AUM to just $100 billion, impacting a slew of smaller and regional banks that were previously not in scope for Basel 3 capital reporting. In a DerivSource Q&A, Valerie Fontaine-Aubry, head of market risk practice for the Americas at Murex, discussed regional bank readiness for the new rules and how an integrated platform can help these banks efficiently manage the new requirements.
Overturning Chevron – What’s the Impact on Derivatives Regulation?
Haynes Boone
In June 2024, the US Supreme Court overturned to the Chevron doctrine, which stated that if any laws were ambiguous, the courts should defer the interpretation of those laws to federal agencies such as national regulators, and they should presume that their interpretations are correct. In this episode of the DerivSource podcast “Living the Trade Lifecycle”, Edward Ivey, Partner at Haynes Boone in Charlotte, North Carolina, explains overturning of the Chevron doctrine might mean for future regulation by the CFTC.
See also this article summarising the podcast conversation.
Countdown to DORA: Industry Pushes to Iron out Final Details
With less than three months until the Digital Operations Resilience Act (DORA) becomes active in January 2025, financial entities need to be moving into their final phase of preparations to be compliant by the 17 January implementation date. As the clock ticks down to the January 2025 deadline, Bob Currie assesses the financial sector’s state of readiness for DORA implementation and potential obstacles to achieving its regulatory objectives.
Margin
Tokenised Collateral: Managing the Transition from Prototype to Market Adoption
Bob Currie examines the benefits that tokenisation and use of smart contract technology may offer for improving collateral efficiency across derivatives and securities finance transactions.
CCPs, Clearing Members Must Boost Margin Transparency
Standards bodies, industry associations and regulators are calling for greater transparency around margin models to boost the resiliency of the global derivatives markets during periods of market volatility. In a recent DerivSource ‘Living the Trade Lifecycle’ podcast, Cumulus9 managing director Rafik Mrabet discusses what this means for market participants and the tools that will help them reach this goal.
Variation Margin Takes Centre Stage – Again
Lynn Strongin Dodds looks at the latest set of recommendations on enhancing variation margin practices.
Real-time Visibility: Why it is Key for Managing Collateral and Payments Now
Baton Systems
High volatility means firms can be surprised by margin calls and intraday liquidity issues when the market changes fast. Tucker Dona, head of Business Development and Customer Success for Baton Systems, discusses how real-time visibility and increased automation can improve the accuracy and effectiveness of both collateral and wholesale payment management in general.
Digital
Great Expectations – an Update on Blockchain and Derivatives
Lynn Strongin Dodds gives a progress report on the evolution of blockchain, derivatives and the recent developments.
Crypto Derivatives – Powering Through
Lynn Strongin Dodds looks at the fortunes of crypto derivatives and why the asset class will continue to capture the imagination.
Legal Document Negotiation: Managing the Advance to Digitisation
The derivatives industry continues to push for the digitalisation of documentation management. Bob Currie explores the digital solutions available today, how they are evolving and what firms can do now to avoid common mistakes as they move to digitalisation.
Clearing
Derivatives Clearing: The Direction of Travel is Clear
Lynn Strongin Dodds looks at the forces behind central clearing and why the momentum will continue.
A New Era of Treasury Clearing Is On The Horizon
Lynn Strongin Dodds looks at DTCC’s report card on the impact the new Treasury clearing mandate will have on volumes, access models, margin and liquidity.
Margin Procyclicality: Changes Needed Now to Reduce Risk Tomorrow
Market volatility and consequent spikes in margin calls over the last four years have renewed industry and regulator focus on margin procyclicality within CCPs. In a DerivSource webinar, Richard Metcalfe, head of Regulatory Affairs, World Federation of Exchanges (WFE), and Joshua Hurley, director, Banks and Markets, Davies discussed current recommendations for improving central counterparty (CCP) margin procyclicality management and explored how key stakeholders can improve anti-procyclicality procedures and tools to mitigate future risk.
ISDA
CDM Update: Focus on Reporting, Collateral & Sec Lending
Bob Currie reviews recent advances and developments in the International Swaps and Derivatives Association (ISDA) common domain model project, a blueprint for how derivatives, securities lending, repo and bonds are traded and managed across the transaction lifecycle.
A Look Inside the ISDA Close-out Framework
Graham Bryant, Associate General Counsel in ISDA’s London office, talks to Bob Currie about the design and benefits of the Association’s digital framework for terminating a portfolio of derivatives transactions.
*Please note that specific elements or information in any of the above articles may be or will become outdated over time.
